How to survive as an Investor

Got the idea to write this post after reading the article by James Altucher titled “How to Survive Your First Year as an Entrepreneur”. It is an excellent article for Entrepreneurs or for that matter anyone running a business. I started on this journey a long time back I have 100% losses and write-offs to show (hello! anyone remember the dot com bubble? or Sun Microsystems?) I bought my first share in an IPO when I was 24 it was in a company in Tamil Nadu called Tamil Nadu Newsprint and Paper Ltd which was making paper from Sugar cane waste, my first environment friendly business investment. I don’t remember what I did with my alloted shares… maybe my Mom still has the share certificate, you see in 1997 they had to physically issue the certificate and mail it to you. I need to check on that investment the company is still active and making a profit. All these suggestions are not my own but what I have heard from investors who have survived the battle to tell the story.

1. Do your homework on your investments – Nothing happens by things dropping from the sky. You need to do homework on any money you invest. What does homework mean? I think Jim Cramer writes more about this in his book “Sane Investing in an Insane World”. It means listening to the Management calls, reading about the company, sector and understanding where your investment stands compared to the peers. Don’t buy a stock and forget about it the way I did.

2. Be patient and stockpile your capital – If you are investing then you know it is very tempting to just buy anything. I don’t know why human behavior is so, when we have money we just want to spend it no erase that blow it. Why is it so hard for us to hold onto our cash? Every investment takes time to create value, nothing happens fast. I know one thing that happens fast, your decision to blow the money. If you are investing in startup companies like I am doing now, understand that it always takes more money and more time to get to those milestones… being aware of it is more important than not. When I started on this journey I asked my Mentor (he does not know he is my mentor so please don’t tell him) Fred Wilson, what would he do if he was just starting over here is the direct quote from him “You have to be very patient and stockpile your capital. It always takes longer and more money“

3. Don’t loose money – Easy to recommend but hard to do. This one is from the Oracle himself and popularized by Phil Town in his popular book Rule #1 Investing and now with Payback time.

4. Do it yourself – Everyone of us have the capacity and the passion to care about our future. Don’t trust some “expert” investor to do it for you. There are no experts, believe me I have met most of them their expertise is their connections that gets them in front of the line on investments. As a small time investor we can do better and are not constrained by the challenges that big money managers have. Once you have made your first billion dollars then hand it over to someone like George Soros or someone who really understands the animal spirit that drives the market to manage your money. Once you have a billion dollars then all these experts come to you and you call the shots.

5. Be a student always – The world changes so rapidly in front of our eyes that it beehoves us to be a student all our life. Always be learning and tinkering with what you know because we never get to know everything. Have the courage to say that you were wrong. Bulls make money, Bears make money and Pigs get slaughtered so don’t be pig headed about your ideas on investing you should be flexible to change position and rethink your thesis. Only the paranoid survive! That is my theme for 2012!